Short-selling bans increased instability – ESRB paper
Banks’ volatility, leverage and default probability increased by bans on short-selling – researchers
During the 2011–12 eurozone crisis, several regulators imposed bans on the practice of short-selling shares in financial companies, saying this would reduce the chances of destabilising runs on share prices.
But a working paper published by the European Systemic Risk Board finds the move actually increased economic instability, especially for banks.
Short-selling bans and bank stability looks at the short-selling bans imposed in 2008–09 in a number of countries, notably the US, Canada, the UK
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